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Address 

before 

The Traffic Club of New York 

at the Waldorf-Astoria 
November 26th, 1918 

By 

Lewis J. Spence 

Director of Traffic of the Southern Pacific Company 
Subject 

Relinquishment of Railroads by the 
Government 


The Traffic Club of New York 

309 Broadway 

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Relinquishment of Railroads by the Government 

An Address Delivered Before 

The Traffic Club of New York 

Tuesday Evening, November 26, 1918 

By 

Lewis J. Spence 

Director of Traffic, Southern Pacific Company 


Mr. President and Fellow Members: 

This is the first annual election of the Traffic Club which it has been my privilege 
to attend, and it has given me special pleasure to join in the formal election of the 
officers who have been chosen this evening. I congratulate the President upon the 
distinction which has come to him, and compliment those who are responsible for his 
selection. 

I rejoice with you tonight in the glorious victory that has been achieved by our 
beloved country and the noble allies with whom we have been associated, and welcome 
with you the opportunity which has now arrived to devote our attention to the pur¬ 
suits of peace and the problems of reconstruction. 

I appear before you as a speaker with a full recognition of my inability to tell the 
well-inrormed members of this organization anything about traffic or transportation 
which they do not already know, and with a considerable sense of responsibility in 
expressing my views upon a subject of such vital importance to you and to the 
country. 

No problem of reconstruction is more important to the public than the future 
operation of our transportation systems. I do not intend to deal with this question 
by criticizing the performance of the Railroad Administration; it isn’t necessary; 
an experiment in railroad and steamship operation has been undertaken which must 
be tested by your own experiences, but it may be appropriate to remind you that 
you have not yet by any means experienced all of the evils of Government ownership 
or permanent Government control. 

It has been nearly eleven months since possession, control and operation of the 
principal railroads of the country and their proprietary steamship lines were assumed 
by the Government. The law provides that Federal control shall continue for a 
reasonable time after the war—not to exceed one year and nine months following the 
proclamation of peace. It also authorizes the President to relinquish control in the 
meantime whenever he shall deem such action needful or desirable. The Act was 
expressly declared to be emergency legislation enacted to meet conditions growing 
out of the war. The owners and users of the transportation systems patriotically 
accepted that reason for assuming control of the properties, but it is not surprising 
that the question should now be persistently asked why Governmental operation of 
the transportation systems of the country should be continued for twenty-one months 
after the proclamation of peace, or, indeed, for any longer period of time than may be 
necessary to restore them to individual management in an orderly way. 

Since the cessation of hostilities, an industrious publicity bureau has devoted 
much attention to an explanation of other benefits accruing from unified control and 
has especially emphasized the elimination of “competitive waste.” The definition of 
“waste” which is most appropriate to this discussion is “useless expenditure.” If 
the expression “competitive waste” is intended to mean that every expenditure arising 
from competition in transportation is a useless expenditure, I venture the opinion 
that it will not strongly appeal to you. If, on the other hand, competitive waste 
means only extravagant expenditures which are not necessary to afford the public 
adequate service and facilities, and reasonable competition, I submit that railroad 
officers, under private management, have a disposition to eliminate waste which has 
never been characteristic of Governmental agencies, and that they may be depended 
upon to eliminate competitive waste insofar as the necessary action to accomplish 
this result shall not be prohibited by law, and insofar as its accomplishment will not 
deprive the public of adequate service and facilities, and reasonable competition. 


3 



If joint ticket offices conveniently and adequately serve the public and are found 
to be more economical than individual ticket offices, I predict that consolidated ticket 
offices will be continued. 

If extravagant duplication of passenger trains can be avoided by co-ordination of 
service without depriving the public of the comforts and conveniences which may 
reasonably be expected, there is every reason why railroad officers should promote 
such co-ordination if they are not prohibited by law from doing so. 

If the shippers are willing to have cars loaded to their maximum capacity—as 
they should be to promote efficiency and economy—it is only necessary for them to 
advocate or concur in the publication of minimum carload weights which will insure 
such maximum loading and continue the efficiency and economy which the Railroad 
Administration has established by more arbitrary methods. 

COMPETITION is where two or more persons are engaged in the same business 
and each is seeking patronage; where competition does not act at all there is complete 
monopoly. Elimination of competition is the avowed policy of the Director General 
of Railroads. It is a fundamental principle of the present system of Federal control, 
and it is inherent in Government ownership or any other form of unified control and 
operation which has ever been proposed. 

If my interpretation of public sentiment is correct, whatever benefits have been 
obtained during Federal control are believed to have been outweighed by the disad¬ 
vantages attributable to the elimination of competition, and the paramount desire 
of the public is: that there shall be a prompt restoration of the benefits of reasonable 
competition in rates and service; that the shipper’s right to route his freight shall be 
respected; that the courtesy and accommodation which are born of individual initiative 
and competitive endeavor shall be revived; and that there shall be an impartial 
consideration of rates by the Interstate Commerce Commission which shall be fair 
alike to shippers and carriers. These advantages are not obtainable under unified 
control and operation; and personally I do not believe that there is any satisfactory 
middle ground between Government ownership and monopoly, on the one hand, and 
individual ownership, with fair competition, on the other hand. 

GOVERNMENT OWNERSHIP would be accomplished by the payment of just 
compensation for the property acquired. There are members of Congress who favor 
this solution of the transportation problem, and there are quite a number of security 
owners who have been driven to the conclusion that Government ownership would 
be preferable to private ownership and operation under a system of regulation which 
denies the carriers sufficient revenue to meet enforced increases in wages and in 
other uncontrollable expenses. If I believed Government ownership to be the salva¬ 
tion of security owners, it would not become me as a director and trustee to dis¬ 
courage that destiny; but I have too much confidence in the good sense of the 
American people to believe that we shall be driven to a solution which, I am sure, 
w r ould be inimical to the public interest, and would be a national calamity. 

If it is a correct conclusion that competition is eliminated in every substantial 
sense by any plan of Federal control or unified operation, whether it contemplates 
the operation of all of the lines of the country as one system or their operation in 
unified groups, and if it is a correct conclusion that the public interest requires the 
preservation of that individual initiative, resourcefulness, efficiency and fair com¬ 
petition which have developed the cheapest and most efficient transportation in the 
world, the people should become aroused to a sense of their responsibility and forestall 
the drift of our transportation systems to Government ownership or some other form 
of unified control. 

The organization and the policies of the Railroad Administration; the propaganda 
in favor of continuing Governmental control of the railroads after the disappearance 
of the avowed necessity for taking them over; and finally the seizure of the ocean 
cables, after the conclusion of an armistice, have too much significance to be ignored 
by the public. The evident desire to continue in peace the Governmental adminis¬ 
tration of the great systems of transportation and communication is revealing a 
tendency toward state socialism which threatens to undermine our free institutions; 
and our most conservative statesmen, irrespective of party, are beginning to view 
this tendency with the greatest concern. 

It must be apparent to everyone who is familiar with the subject that some com¬ 
prehensive legislation will have to be enacted to correct the intolerable burdens of the 
past and ensure the successful development of the railroads as useful instrumentalities 
of commerce. For example, labor difficulties, which are always with us, have been 
greatly increased by the exigencies of war and the Federal control of railroads. 
There have been Wage and Adjustment Commissions to deal with wages, hours and 
working conditions, which have resulted in generous treatment of employes, and I 
believe it will be to the interest of the public, the employes and the railroads to have 
such a tribunal of adjustment under private control; but I believe quite as firmly that 
the findings of such a Commission should be subject to the review and approval of 
the same Governmental agency which is charged with the regulation of rates, and 


P D 1 . 0 .4 


that such Governmental agency should also be charged with the duty of readjusting 
rates contemporaneously with any readjustment in wages which it may approve and 
authorize; but, 

The longer the railroad and steamship lines are continued under unified control 
and operation, the more completely their individualities will be obliterated, their 
organizations disrupted, and their individual credit impaired. If unified control is 
not to be prolonged for exploitation by the advocates of Government ownership or 
the apostles of paternalism, the situation, in my judgment, requires prompt, concerted 
and vigorous action by the public. 

The short cut would be for the President to exercise the authority conferred upon 
him by the Federal Control Act to relinquish control of the properties; but if this 
course is taken his notice of intention to relinquish the properties on a specified date 
should be accompanied by a recommendation to Congress to enact the necessary 
legislation to provide a tribunal for the consideration of wages and the contempo¬ 
raneous adjustment of rates. 

Why should not a public petition be made to the President to so deal with the 
question? If he submits it to Congress in this way, it will, of course, be important 
that the people should not fail to exert their influence upon the members of Congress 

to ensure the enactment of the legislation immediately required to become effective 
with the return of the properties. 

The Director General of Railroads has tendered his resignation with the suggestion 
that it become effective on January first. Is there any reason why a successor should 
be appointed? Is there any good reason why the President should not inform Con¬ 
gress when it reconvenes on December second of his intention to relinquish the 
properties at midnight December thirty-first, and recommend enactment of the 
specific legislation which should become effective on January first; with the under¬ 
standing that additional legislation shall be undertaken after a comprehensive study 
of the entire subject. 

Both the President and the Congress will respond to an unmistakable expression 
of public sentiment. 

Will the people rise to their responsibilities? 


PRINCIPLES ENUNCIATED IN THIS ADDRESS APPROVED BY THE TRAF¬ 
FIC CLUB OF NEW YORK. 


Following the address of Mr. Spence, as herein published, The Traffic Club, in 
session at its annual meeting, by proper motion unanimously adopted, went on record 
as approving the principles enunciated, and the Board of Governors of the Club was 
directed to urge the early return of the transportation systems to individual control 
and operation, and the enactment of suitable legislation placing the responsibility of 
adjustment of rates contemporaneously with the adjustment of wages upon the 

Interstate Commerce Commission. « 

C. A. SWOPE, Secretary. 


Approved: RALPH S. STUBBS, President. 


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